One of the biggest stories to have gripped the news circuit is Snapchat – a free mobile chat application which has rejected a $3 billion cash offer from Facebook Inc. although neither company has confirmed the allegations.

Snapchat allows it users to send pictures or video messages that get deleted just a few seconds after they’re opened and has never made a profit.

The reason one could speculate for this sudden offer being made by Facebook, if at all the rumors are true is the decrease in daily usage of Facebook especially among teenagers. Meanwhile there has been a sudden boom in the usage of applications such as Whatsapp and Snapchat.

Facebook has long known about the threat of these mobile messaging apps. The social network recently put a heavier emphasis on its Messenger app, but Facebook also released an app named “Poke” at the end of 2012 that many saw as a direct response to the growing popularity of Snapchat.

Named Poke, the mobile app allowed users to send pictures and videos to friends that automatically delete after a set amount of time, just like Snapchat. Unlike Snapchat, Poke quickly fell out of favor. After climbing to the top of the app-download charts, Poke fell out of the top 25 by mid-March.

Clearly, Facebook had met its match and it envisaged that soon its popularity would be at stake; unless and until drastic steps weren’t taken.

It’s therefore doesn’t come as a surprise that Facebook wanted to purchase Snapchat, but $3 billion would have made it Facebook’s most expensive acquisition to date. It paid only $1 billion for Instagram, an application that has far more users and makes more sense as an advertising platform.

The million dollar question is as to why did Snapchat reject such an altruistic offer? Snapchat CEO Evan Spiegel thinks that the application can grow even further and Chinese E-Commerce firm Tencent Holdings second his thoughts, apparently the commercial firm is planning to invest $200 million in Snapchat further increasing the value of the application to $4 billion.